Australia’s industry superannuation sector is poised to invest in global real estate, initially in Europe, through a collective platform due to be launched later this year.
IFM Investors and Industry Super Property Trust (ISPT), both owned by 27 superannuation funds, are to launch International Property Funds Management (IPFM) later this year.
Tony McCormack, IPFM CEO, told IPE Real Assets that IPFM will initially target diversified property investments with a focus on core, income-producing assets.
In the first instance, IPFM it will look at such cities as London, Paris, Frankfurt and Berlin.
IPFM is currently mapping out its first investment strategy for a diversified pooled fund that will initially focus on core properties in European gateway cities.
IPE Real Assets understands that the initial raising is expected to be around AUD500m (€311m), with the first transactions likely early next year.
McCormack said IPFM will aim to provide institutional investors with competitive risk-adjusted returns.
The new venture will be able to call on the property and asset management expertise of ISPT, which manages Australian assets totalling AUD$15bn.
Initially established to enable Australian super funds to invest in large-scale infrastructure, the AUD105bn IFM Investors has expanded its investor base to more than 280 institutions, including some large global pension funds and sovereign wealth funds.
In time, and like IFM Investors, IPFM’s investor base is likely to include non-Australian institutional investors.
Australian industry super funds had poor experiences when they made their first investments in overseas real estate 10 years ago, investing through listed vehicles, such as the now defunct Babcock and Brown, and many of the large REITs. The overseas strategies of these groups unravelled during the global financial crisis, resulting in losses for their investors.
Since then, Australian industry super funds, which have on average 10% allocation to property, have mostly focused on the increasingly expensive Australian property market.
In recent times, Australian asset consultants have been advising industry funds to consider allocating to global direct property.
Industry sources said that, just as global investors are coming to Australia and the wider Asia-Pacific for geographical diversification, Australian super funds should similarly have an allocation overseas.
The AUD130bn AustralianSuper and the AUD50bn REST have direct property investments in joint ventures offshore with local partners.
Since 2014, AustralianSuper has stepped up investment in core assets, with long-term prospects in overseas markets such as London.